Former President Barack Obama's EPA "made assumptions about the standards that didn't comport with reality, and set the standards too high," Pruitt said in a statement.

The Alliance of Automobile Manufacturers applauded the move, saying it would "keep new vehicles affordable to more Americans."

"This was the right decision, and we support the administration for pursuing a data-driven effort and a single national program as it works to finalize future standards," said the industry group representing Fiat Chrysler, Ford, General Motors, Toyota, Volkswagen and others.

The rules set in 2012, known as the Corporate Average Fuel Economy or CAFE standards, sought to reduce pollutants released into the air by gradually increasing fuel efficiency across all models offered by manufacturers to 54.5 miles per gallon (4.32 liters per 100 kilometers), compared to 35.5 miles per gallon in 2016.

Pruitt said the EPA in 2012 cut short its review of the standards for "politically charged expediency," but he will work with the National Highway Traffic Safety Administration to develop new, "more appropriate" rules.

The agency is also examining the waiver that allows California, the most popular U.S. state, to impose tougher requirements than called for under the Clean Air Act.

One state cannot "dictate standards for the rest of the country," Pruitt said.

"EPA will set a national standard for greenhouse gas emissions that allows auto manufacturers to make cars that people both want and can afford -- while still expanding environmental and safety benefits of newer cars."

This is likely to open a long legal battle between California, a traditionally Democratic state, and Trump's Republican administration.